Community Investment Strategies

Community Investment Strategies

Health systems and hospitals can use their financial assets in many different ways to positively impact community needs. Programs focused on “mission investing” in many cases were begun by non-profit institutions expressing mission. Hospital and health systems can explore and create ways to invest in their communities through:

Socially Responsible Investment: Socially responsible investing (SRI), also known as sustainable, socially conscious, “green” or ethical investing, is any investment strategy which seeks to consider both financial return and social good.

Social Screens: Assures that financial resources are: 1) not used to participate in producing products or services that diminish the health of the individual or community; or 2) are used to invest resources positively to directly or indirectly improve the health of the community.

Examples of negative social screens: Do not invest in coal production because of its impact on climate change. Do not invest in tobacco companies because of health impact.

Example of positive social screen: Do invest in clean energy to positively impact climate change.

Shareholder Advocacy: Organizations use the investment position to promote the hospital’s or organization’s values. Advocacy may involve writing letters to companies, engaging in dialogues with companies, or filing resolutions with companies.

Examples of this work include: Engaging with pharmaceutical companies to encourage them to expand access to drugs needed in low-income countries. Engaging with fast food eateries and/or restaurants to encourage them to remove sodas from the children’s menus and to develop healthy food options.

Proxy Voting: Organizations vote the proxies for the holding in all investment portfolios to ensure the organization’s values and voice are heard.

Example: Voting for a more diverse Board of Directors to oversee companies in the portfolio will ensure companies are listening to their constituencies.

Community Direct Investment: A community direct investment is a loan or deposit usually made to support community driven initiatives for housing or economic development with the goal of creating healthier communities. The investment is made in enterprises that may have difficulty attracting funds in the regular capital markets. Most of these projects are intended to empower low-income persons and underserved communities; they should reflect local community priorities and serve as a tool for building healthier communities. They can provide high impact social returns.

Loans to Intermediaries: A loan made to a non-profit organization, which then manages and lends the funds to various community programs that meet agreed on guidelines. An example of an intermediary is LISC-the Local Initiative Support Corporation.

Direct Loans: A loan, guaranty or credit enhancement made directly to a non-profit entity such as a community development corporation, a community clinic, a child care center, etc.

Economically Linked Deposits: A certificate of deposit or linked deposit is made at a minority-owned, community development, or other financial institution. A portion of the interest is directed to support social or economic development.

Resources:

Organizations can make direct grants to non-profit organizations to support their efforts in the community. Hospitals and health systems can do this directly, or can form foundations under or apart from the current hospital system structure. Non-profits can be sought out for their connection to desired outcomes (invitation to apply), or non-profits can also approach the hospital.

Examples: Dignity Health has distributed grants to non-profits in the regions where they have hospitals.

Health organizations don’t have to form a foundation to distribute grants. However some have created these organizations to expand their mission in the community.

Types of Foundations: There are other types of foundations such as family foundations, but most hospitals or affiliated organizations are organized as corporate foundations, or health conversion foundations.

Health Conversion Foundations: Some health organizations were sold, and as a part of the sale generated income that was dispersed into a health conversion foundation. Some of these foundations are large foundations contributing within the geography of where the organization that was sold was located. An example of this is The California Endowment or The California Wellness Foundation—both in California.

Corporate Foundations: Some health systems have organized foundations under the umbrella of the non-profit corporation, and operate within the health system office. Some were formed at the initiation of the hospitals as a part of the mission and vision of the sponsors. They sometimes are funded by yearly allotments, or in some cases an agreed upon allotment that is an ongoing policy. An example is the St. Joseph Health system which allocates a percent of net income from the hospitals to support the local community.